Efficacy of Monetary Policy in Balance of Payment Adjustment in Nigeria 1981 – 2012: An Empirical Assessment

Dr Ohiomu Sylvester and Sede P.   (2015)

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Abstract

Ohiomu, S. and Sede P. (2015). Efficacy of Monetary Policy in Balance of Payment Adjustment in Nigeria 1981 – 2012: An Empirical Assessment. Uniben Journal of Humanities Vol. 3 No.1, 2015, Pp 65 – 81 ISSN: 2315-621X www.uniben.edu.ng

Abstract

This paper investigated the efficacy of monetary policy in balance of payments adjustment in Nigeria. Quarterly data from the CBN statistical bulletin spanning the period 1981 to 2012 were used. The elasticity, absorption and monetary approaches to the balance of payments were examined along with the empirical analysis of the determinants of balance of payments in Nigeria. Having rid the series of the defect of unit root and also obtaining the assurance of the existence co-integrating feature among the variables by the usual Augumented Dickey Fuller and Johanson tests respectively. The empirical results suggest that money supply played significant role in determining balance of payments in Nigeria. This confirms the efficacy of monetarist postulation in balance of payment adjustment for Nigeria case for the period under study. The variables were correctly signed but exchange rate was not statistically significant. The test of overall goodness of fit of the model showed appreciably good fit. This implied that appreciable policy attention should be given to monetary policy variable in balance of payments adjustment exercise in Nigeria. The paper also opined other fiscal variables such as import and export duties should not be excluded in the exercise of balance of payment disequilibrium correction in Nigeria. Thus for stability in the balance of payments, policies that will reduce price volatility should be pursued. Such policies include appropriate targeting of inflation rate to ensure that domestic price level does not diverge significantly from rates existing in the world market. Emphatically, appropriate monetary and fiscal policies should be utilized in order to maintain a sustainable balance of payments position in Nigeria.


Item Type: Journal article(non-copyrighted)
Format: Word document,   17.15 KB
Copyright: Creative Commons LicenseCreative Commons license
Keywords: monetary, policies, Payment, Adjustment
Department: Economics
Field of Study: Economics
Uploaded By: Ihonvbere Williams S. M. A
Date Added: 02 Nov 2017 2:58pm
Last Modified: 02 Nov 2017 7:58am
Journal URL: http://edouniversity.edu.ng/oer/journal/efficacy_of_monetary_policy_in_balance_of_payment_adjustment_in_nigeria_1981_2012_an_empirical_assessment


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